Repair your own credit after a foreclosure, short sale or Deed-In-Lieu. Over 1 million people were forced into foreclosure in 2010. Although the numbers have been decreasing, foreclosures still remain an issue for millions of people. Foreclosure can leave a big mark on your credit report and I have seen credit scores drop by over 150 points.
It is imperative that you get through the foreclosure process as soon as possible. The clock does not technically start until the deed or ownership has been transferred on your home. Many believe it happens at the notice of foreclosure or even at the end of any redemption period you may have. The fact is a foreclosure is not complete until the ownership transfers. Many people are surprised when they go to buy a new home and the date of foreclosure is not what they thought it was. If you have a foreclosure and you want to repair your own credit, I can help.
Get Foreclosure Help if There is Still Time
There are numerous options available if you have not yet finished the foreclosure process. Depending on the type of loan you have, FHA, Fannie Mae, Freddie Mac or USDA, your servicer may be able to do a loan modification and put the late payments on the end of your loan. To be eligible for this you will need to have a clear repayment strategy and a good explanation is required for approval.
Check with your local and state government agencies . Many areas have one or more sources available for foreclosure assistance. You can simply search online for your specific states Foreclosure Hotline. I have even seen churches get involved with loaning money to their parishioners. The point is there are several resources available and you will want to exhaust all of your options to keep your home.
Short Sale vs. Deed-In-Lieu
A short sale is a great way to avoid foreclosure. In a short sale, you sell your home to a third party for less than the amount you owe on your mortgage. In this case, the lender, state or federal guidelines forgive the rest of the loan and you avoid the foreclosure. You will most likely still have a negative mark on your credit but it will be viewed better than a foreclosure in most situations.
The Loss Mitigation Department
must approve the short sale before any transactions are made. Many Realtors have become well educated in this process and I highly recommend you speak with one. The seller or Realtor has to submit a Loss Mitigation application to be approved for Short Sale. This application normally includes:
- Proof of current income
- Latest tax returns.
- A hardship Letter.
- Two recent bank statements for all accounts
- A financial statement providing complete information about monthly expenses and income.
Deed in Lieu of foreclosure is another method to avoid foreclosure if you cannot sell your home through Short Sale. In this case, a homeowner voluntarily signs over the title of the house to the creditor in lieu for a release from the remaining mortgage.
Just like Short Sale, the mortgager has to submit a Loss Mitigation application for Deed in Lieu as well. You need to attach all of the documents with this application that you attached in the case of Short Sale to get approved for Deed in Lieu.
Sometimes the lender also requires you to try selling your home within 3 months before qualifying for the Deed in Lieu. You also need to provide listing evidences to prove that you have actually done so. After the Deed in Lieu is approved, you have to sign a deed transferring the rights of the property to the lender as well as an estoppel affidavit. The estoppel affidavit includes provisions like you are voluntarily surrendering the title of the property in addition with general terms and conditions.
ONLY AFTER ALL THE ABOVE OPTIONS HAVE BEEN EXHAUSTED SHOULD YOU LET YOUR HOME BE FORECLOSED ON
Repair your own credit, removing a Foreclosure from your Credit Report.
If your lender followed all of the appropriate steps during the process, it will be very difficult to completely remove the foreclosure from your report. The key is in your rights under the FCRA act. All items on your credit report must be accurate and verifiable. What you need to do is call into question ALL of the details in your credit file as it pertain to the foreclosure. If the creditor does not properly verify those items then the bureaus must remove this form your report. I will have specific details available in my advanced credit repair letters so you can repair your own credit.